CBC 2015: Marc Sorini Tackles Franchise Reform

Marc Sorini

Marc Sorini

One of the biggest issues facing the craft brewing industry as it continues to evolve is that of franchise laws, the rules that contractually bind manufacturers to their wholesaler partners. Across the country, brewers are trying to find more latitude in how they bring beer to market. On the other hand, wholesalers want not to be at the flippant will of a partner who may terminate a relationship for no good reason, thereby crippling their own business.

It’s a tricky situation and the laws and solutions vary from state to state. But that didn’t stop Marc Sorini, an attorney with McDermott, Will & Emory who specializes in alcohol regulation, from tackling the subject this morning at the Craft Brewers Conference in Portland, Ore.

Before making the case for reform, Sorini explained some of the benefits of tied house laws. He brought up the example of a major soda brand essentially buying a retail franchise, keeping a major establishment stocked only with Coke or Pepsi products, for instance.

“That kind of naked, perfectly legal, ‘I’m going to buy Applebees’ can’t happen here,” he said. “That’s extremely good for you.”

That is to say, the current system comes with certain protections for brewers providing them viable routes to market. Nevertheless, he said, reform is necessary and a net good for the industry at large.

Laying out the case for brewer friendly reform, one of the main things Sorini discussed was self-distribution. He said the freedom to do business without a wholesaler in the first place alleviates some of the risks assumed by wholesalers when they take on new brands.

Sorini said self-distribution provides an incubator of sorts for smaller brands to test the market on their own before a wholesaler commits valuable resources behind selling a new and unknown product.

“How many great brands have been created by self distribution? When you think of Stone, think of Widmer,” he said. Now however? “They’re making distributors lots and lots of money.”

Sorini also spent a sizeable portion of the talk countering some of the arguments against reform. One of the oft-cited rebukes is rooted in the old adage, “if it ain’t broke, don’t fix it.” While the system may not be broken, Sorini noted that more lenient laws are in place in some of the nation’s most notable craft markets. The three-tier system of brewers, distributors and retailers has not been fractured in those areas, he said.

Regardless of the contentious nature of the subject matter, Sorini said he expects to see “more reasonableness on both sides” over the next five years as industry stakeholders in all 50 states evaluate the mechanics of the three-tier system and push for reform.

“I think the logic behind it is very strong and I think the political case behind it is becoming stronger,” he said.